NCR Atleos Corp [NATL] Filings

10-Q 1 natl-20240630.htm 10-Q natl-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

FORM 10-Q

________________________

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________

Commission File Number: 001-41728

________________________

NCR ATLEOS CORPORATION

(Exact name of registrant as specified in its charter)

________________________


Maryland						92-3588560
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

864 Spring Street NW

Atlanta, GA 30308

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (832) 308-4999

Not Applicable

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	NATL	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☑

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of August 8, 2024, there were 72,321,897 shares of the registrant’s common stock issued and outstanding.

Table of Contents

TABLE OF CONTENTS


PART I. Financial Information

	Description	Page

Item 1.	Financial Statements	3

	Condensed Consolidated Statements of Operations (Unaudited) Three and Six Months E nded June 30 , 2024 and 2023	3

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three and Six Months Ended June 30 , 2024 and 2023	4

	Condensed Consolidated Balance Sheets (Unaudited) June 30 , 2024 and December 31, 2023	5

	Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30 , 2024 and 2023	6

	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) Three and Six Months Ended June 30 , 2024 and 2023	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	54

Item 4.	Controls and Procedures	55

PART II. Other Information

	Description	Page

Item 1.	Legal Proceedings	56

Item 1A.	Risk Factors	56

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56

Item 5.	Other Information	56

Item 6.	Exhibits	57

	Signatures	58

Table of Contents

Part I. Financial Information

Item 1. FINANCIAL STATEMENTS

NCR Atleos Corporation

Condensed Consolidated Statements of Operations (Unaudited)


In millions, except per share amounts	Three months ended June 30				Six months ended June 30
	2024		2023		2024		2023
Product revenue	$	247	$	262	$	487	$	496
Service revenue	834		778		1,644		1,530
Total revenue	1,081		1,040		2,131		2,026
Cost of products	210		215		422		410
Cost of services	618		578		1,235		1,149
Selling, general and administrative expenses	132		149		264		285
Research and development expenses	14		19		31		37

Total operating expenses	974		961		1,952		1,881
Income from operations	107		79		179		145

Interest expense	(79)		—		(158)		—
Related party interest expense, net	—		(5)		—		(9)
Other income (expense), net	4		1		7		1
Income before income taxes	32		75		28		137
Income tax expense	4		23		8		48
Net income	28		52		20		89
Net income (loss) attributable to noncontrolling interests	(1)		(1)		(1)		—
Net income attributable to Atleos	$	29	$	53	$	21	$	89

Net income per share attributable to Atleos common stockholders:
Net income per common share
Basic	$	0.40	$	0.75	$	0.29	$	1.26
Diluted	$	0.39	$	0.75	$	0.29	$	1.26
Weighted average common shares outstanding
Basic	72.2		70.6		71.9		70.6
Diluted	73.7		70.6		73.5		70.6

See Notes to Condensed Consolidated Financial Statements.

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NCR Atleos Corporation

Condensed Consolidated Statements of Comprehensive Income (Unaudited)


In millions	Three months ended June 30				Six months ended June 30
	2024		2023		2024		2023
Net income	$	28	$	52	$	20	$	89
Other comprehensive income (loss):
Currency translation adjustments
Currency translation adjustments gain (loss)	(39)		(3)		(25)		24
Derivatives
Unrealized gain (loss) on derivatives	13		49		38		38
(Gain) loss on derivatives arising during the period	(22)		(21)		(43)		(36)
Less income tax	2		(6)		2		—






Other comprehensive income (loss)	(46)		19		(28)		26
Total comprehensive income (loss)	(18)		71		(8)		115
Less comprehensive income attributable to noncontrolling interests:
Net income (loss)	(1)		(1)		(1)		—
Currency translation adjustments	(2)		1		(1)		—
Amounts attributable to noncontrolling interests	(3)		—		(2)		—
Comprehensive income (loss) attributable to Atleos common stockholders	$	(15)	$	71	$	(6)	$	115

See Notes to Condensed Consolidated Financial Statements.

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NCR Atleos Corporation

Condensed Consolidated Balance Sheets (Unaudited)


In millions, except per share amounts	June 30, 2024		December 31, 2023
Assets
Current assets
Cash and cash equivalents	$	374	$	339
Accounts receivable, net of allowances of $18 and $14 as of June 30, 2024 and December 31, 2023, respectively	707		711
Inventories	329		333
Restricted cash	249		238
Other current assets	320		254
Total current assets	1,979		1,875
Property, plant and equipment, net	457		468
Goodwill	1,951		1,952
Intangibles, net	596		635
Operating lease right of use assets	139		144
Prepaid pension cost	221		219
Deferred income tax assets	265		254

Other assets	157		169
Total assets	$	5,765	$	5,716
Liabilities and stockholders’ equity
Current liabilities
Short-term borrowings	$	84	$	76
Accounts payable	571		500
Payroll and benefits liabilities	145		149
Contract liabilities	318		325
Settlement liabilities	250		218
Other current liabilities	485		486
Total current liabilities	1,853		1,754
Long-term borrowings	2,921		2,938
Pension and indemnity plan liabilities	388		389
Postretirement and postemployment benefits liabilities	57		60
Income tax accruals	37		36
Operating lease liabilities	105		109
Deferred income tax liabilities	29		34
Other liabilities	124		141
Total liabilities	5,514		5,461


Stockholders’ equity
Atleos stockholders’ equity
Preferred stock: par value $0.01 per share, 50.0 shares authorized, no shares issued	—		—
Common stock: par value $0.01 per share, 350.0 shares authorized, 72.2 and 70.9 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively	1		1
Paid-in Capital	23		12
Retained earnings	167		153
Accumulated other comprehensive income	59		86
Total Atleos stockholders’ equity	250		252
Noncontrolling interests in subsidiaries	1		3
Total Stockholders’ equity	251		255
Total liabilities and stockholders’ equity	$	5,765	$	5,716

See Notes to Condensed Consolidated Financial Statements.

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NCR Atleos Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)


In millions	Six months ended June 30
	2024		2023
Operating activities
Net income (loss)	$	20	$	89
Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation expense	68		56
Amortization expense	76		64
Stock-based compensation expense	19		33
Deferred income taxes	(12)		(13)
Loss (gain) on disposal of property plant and equipment	4		—
Bargain purchase gain from acquisition	(5)		—

Changes in assets and liabilities:
Receivables	(11)		17
Related party receivables and payables	—		(13)
Inventories	(49)		(15)
Settlement assets	(22)		1
Current payables and accrued expenses	100		(26)
Contract liabilities	(21)		18
Employee benefit plans	(20)		(6)
Other assets and liabilities	10		(5)
Net cash provided by operating activities	$	157	$	200
Investing activities
Expenditures for property, plant and equipment	$	(47)	$	(22)
Additions to capitalized software	(15)		(15)

Amounts advanced for related party notes receivable	—		(14)
Repayments received from related party notes receivable	—		36
Purchase of intellectual property	(8)		—
Other investing activities, net	(1)		—
Net cash used in investing activities	$	(71)	$	(15)
Financing activities

Proceeds from related party borrowings	$	—	$	16
Payments on related party borrowings	—		(57)


Payments on term credit facilities	(36)		—
Borrowings on revolving credit facilities	533		—
Payments on revolving credit facilities	(512)		—

Payments on other financing arrangements	(2)		—
Proceeds from employee stock plans	1		—
Net transfers (to) from NCR Corporation	—		(89)
Tax withholding payments on behalf of employees	(13)		—
Principal payments for finance lease obligations	(1)		—



Net cash used in financing activities	$	(30)	$	(130)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(12)		11
Increase (decrease) in cash, cash equivalents, and restricted cash	44		66
Cash, cash equivalents, and restricted cash at beginning of period	586		499
Cash, cash equivalents and restricted cash at end of period	$	630	$	565

See Notes to Condensed Consolidated Financial Statements.

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NCR Atleos Corporation

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)


	Atleos Stockholders
	Common Stock
In millions	Shares	Amount		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests in Subsidiaries		Total
December 31, 2023	71	$	1	$	12	$	153	$	86	$	3	$	255
Comprehensive income (loss):
Net income (loss)	—	—		—		(8)		—		—		(8)
Other comprehensive income (loss)	—	—		—		—		17		1		18
Total comprehensive income (loss)	—	—		—		(8)		17		1		10

Stock compensation plans	1	—		2		—		—		—		2
March 31, 2024	72	$	1	$	14	$	145	$	103	$	4	$	267
Comprehensive income (loss):
Net income (loss)	—	—		—		29		—		(1)		28
Other comprehensive income (loss)	—	—		—		—		(44)		(2)		(46)
Total comprehensive income (loss)	—	—		—		29		(44)		(3)		(18)
Net transfers from Voyix	—	—		—		(7)		—		—		(7)
Stock compensation plans	—	—		9		—		—		—		9
June 30, 2024	72	$	1	$	23	$	167	$	59	$	1	$	251




In millions	Shares	Amount		Paid-in Capital		Retained Earnings		Net Investment from NCR Corporation		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests in Subsidiaries		Total
December 31, 2022	—	$	—	$	—	$	—	$	3,326	$	(63)	$	(1)	$	3,262
Comprehensive income (loss):
Net income (loss)	—	—		—		—		36		—		1		37
Other comprehensive income (loss)	—	—		—		—		—		8		(1)		7
Total comprehensive income (loss)	—	—		—		—		36		8		—		44
Net transfers to NCR Corporation	—	—		—		—		(52)		—		—		(52)
March 31, 2023	—	$	—	$	—	$	—	$	3,310	$	(55)	$	(1)	$	3,254
Comprehensive income (loss):
Net income (loss)	—	—		—		—		53		—		(1)		52
Other comprehensive income (loss)	—	—		—		—		—		18		1		19
Total comprehensive income (loss)	—	—		—		—		53		18		—		71
Net transfers to NCR Corporation	—	—		—		—		(4)		—		—		(4)
June 30, 2023	—	$	—	$	—	$	—	$	3,359	$	(37)	$	(1)	$	3,321

See Notes to Condensed Consolidated Financial Statements.

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NCR Atleos Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

Index to Financial Statements and Supplemental Data


Note 1. Basis of Presentation and Summary of Significant Accounting Policies

Note 2. Goodwill and Purchased Intangible Assets
Note 3. Segment Information and Concentrations
Note 4. Debt Obligations
Note 5. Trade Receivables
Note 6. Income Taxes
Note 7. Stock Compensation Plans
Note 8. Employee Benefit Plans
Note 9. Commitments and Contingencies
Note 10. Related Parties
Note 11. Earnings Per Share
Note 12. Derivatives and Hedging Instruments
Note 13. Fair Value of Assets and Liabilities
Note 14. Accumulated Other Comprehensive Income
Note 15. Supplemental Financial Information

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NCR Atleos Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NCR Atleos Corporation (“Atleos,” the “Company,” “we,” or “our”) is an industry-leading financial technology company providing self-directed banking solutions to a global customer base, including financial institutions, retailers and consumers. The Company’s comprehensive solutions enable the acceleration of self-directed banking through automated teller machine (“ATM”) and interactive teller machine (“ITM”) technology, including software, services, hardware and our proprietary Allpoint network. Atleos is a global company that is headquartered in Atlanta, Georgia.

On September 15, 2022, NCR Corporation (now known as NCR Voyix Corporation or “Voyix,” and referred to as “NCR” prior to the Separation), announced its plan to separate its businesses into two distinct, publicly-traded companies, whereby NCR would execute a spin-off to NCR stockholders of its self-service banking, network, and telecommunications and technology businesses, (the “Spin-off” or “Separation”). On September 22, 2023, the Board of Directors of NCR authorized the Spin-off of Atleos, which was completed on October 16, 2023. The Spin-off was achieved by means of a pro-rata distribution of all of Atleos’ common stock to Voyix’s stockholders of record at the close of business on October 2, 2023 (“Record Date”) (collectively, the “Distribution”).

On October 16, 2023, the Company became a stand-alone publicly-traded company, and its financial statements are now presented on a consolidated basis. The financial statements for all periods presented, including the historical results of the Company prior to October 16, 2023, are referred to as “Condensed Consolidated Financial Statements”, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) without audit pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and, in the opinion of management, include all adjustments (consisting of normal, recurring adjustments, unless otherwise disclosed) necessary for a fair statement of the condensed consolidated results of operations, financial position, and cash flows for each period presented. The consolidated results for the interim periods are not necessarily indicative of results to be expected for the full year. The 2023 year-end Condensed Consolidated Balance Sheet was derived from audited financial statements but does not include all disclosures required by GAAP. These financial statements have been prepared on a consistent basis, and should be read in conjunction with the Company’s Form 10-K for the year ended December 31, 2023.

Prior to the Separation, Atleos was wholly owned by NCR; consequently, stand-alone financial statements had not historically been prepared. The Condensed Consolidated Financial Statements for the three and six months ended June 30, 2023 have been derived from NCR’s historical accounting records and are presented on a stand-alone basis as if the Company’s operations had been conducted independently from NCR. The Condensed Consolidated Statements of Operations include all revenues and costs directly attributable to the Company, including costs for facilities, functions and services used by or for the benefit of the Company. The Company has historically functioned together with the other businesses controlled by NCR. Accordingly, the Company relied on NCR’s corporate overhead and other support functions for its business. Therefore, certain corporate overhead and shared costs have been allocated to the Company. Management considers that such allocations have been made on a reasonable basis consistent with benefits received but may not necessarily be indicative of the costs that would have been incurred if the Company had been operated on a stand-alone basis for the periods presented.

Prior to the Separation, income tax expense and tax balances were calculated on a separate tax return basis. The separate tax return method applies the accounting guidance for income taxes to the stand-alone financial statements as if the Company was a separate taxpayer and a stand-alone company even though the Company filed as part of NCR’s tax group in certain jurisdictions prior to Separation. Management believes the assumptions supporting the allocation and presentation of income taxes on a separate return basis are reasonable.

The historical Condensed Combined Financial Statements did not purport to reflect what the Company’s results of operations, comprehensive income, financial position, equity or cash flows would have been had the Company operated as a stand-alone public company during the periods presented. Refer to Note 1, “Basis of Presentation and Summary of Significant Accounting Policies”, of the audited Consolidated Financial Statements in the 2023 Form 10-K for additional details on Atleos’ basis of presentation during periods prior to the Separation and post Separation.

All intracompany accounts and transactions within the Company have been eliminated in the preparation of the Condensed Consolidated Financial Statements. Prior to the Separation, the aggregate net effect of transactions between the Company and NCR that are not historically settled in cash have been reflected in the Condensed Consolidated Statements of Cash Flows as Net transfers from (to) Parent within financing activities. See Note 10, “Related Parties”, for further information.

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NCR Atleos Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Following the Separation, certain functions continue to be provided by or for Voyix under the Transition Services Agreements or are being performed using Atleos’ own resources or third-party service providers. Additionally, certain maintenance services, manufacturing services, product resale and other support services and supply chain operations will continue to be provided by or to Voyix under the Commercial Agreements.

The Company incurred certain costs in its establishment as a stand-alone public company and expects to incur ongoing additional costs associated with operating as an independent, publicly-traded company.

Unless otherwise noted, all figures within the Condensed Consolidated Financial Statements are stated in U.S. Dollars (USD) and millions.

Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the periods reported. Estimates are used when accounting for receivable and inventory reserves, depreciation and amortization of long-lived assets, employee benefit plan obligations, asset retirement obligations, product liabilities, income and withholding taxes, contingencies, valuation of business combinations, certain aspects of revenue recognition, and allocations of cost and expenses from NCR prior to Separation.

Although our estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our results of operations and financial position. In particular, a number of estimates have been and will continue to be affected by the ongoing macroeconomic pressures and geopolitical challenges. The ultimate impact on our overall financial condition and operating results will depend on the duration and severity of supply chain challenges and cost escalations including materials, labor and freight, and any additional governmental and public actions taken in response. As a result, our accounting estimates and assumptions may change over time as a consequence of these external factors. Such changes could result in future impairments of goodwill, intangible assets, long-lived assets, incremental credit losses on accounts receivable and decreases in the carrying amount of our tax assets.

Subsequent Events The Company evaluated subsequent events through the date that our Condensed Consolidated Financial Statements were issued. Other than the items discussed below and within the Notes to Condensed Consolidated Financial Statements, no matters were identified that required adjustment to the Condensed Consolidated Financial Statements or additional disclosure.

Effective August 5, 2024, the Company executed $450 million aggregate notional amount interest rate swap contracts terminating on December 31, 2027. These interest rate swap contracts have fixed rates ranging from 3.442% to 3.479%, and have been designated as cash flow hedges of the floating rate interest associated with the Company’s U.S. Dollar vault cash agreements.

On August 9, 2024, the Company executed $500 million aggregate notional amount interest rate swap contracts that began August 13, 2024 and will terminate on December 31, 2027. These interest rate swap contracts have fixed rates ranging from 3.592% to 3.610%, and have been designated as cash flow hedges of the floating rate interest associated with the Company’s Term Loan Facilities, discussed in Note 4, “Debt Obligations”. These hedging activities are in line with our interest rate risk management strategy outlined in Note 12, “Derivatives and Hedging Instruments”.

Prior Period Financial Statement Revision  In connection with the preparation of the Company’s second quarter 2024 financial statements, management identified errors pertaining to the Separation-related accounting entries recorded in the fourth quarter of 2023, which impacted the December 31, 2023 balance sheet and statement of changes in stockholders’ equity. Some of these errors were previously recorded out-of-period in the first quarter of 2024. In order to correctly state December 31, 2023 equity to reflect the impact of the spin-off transaction, which involved a net distribution payment of $2,996 million to Voyix in consideration for the net assets contributed to Atleos, management has revised the December 31, 2023 balance sheet and statement of changes in stockholders’ equity to reflect the impact of the errors, including those previously recorded in the first quarter of 2024. This also results in a revision to the statement of changes in stockholders’ equity for the three months ended March 31, 2024. The adjustments have no impact on operating results or cash flows. The Company evaluated the impact of the adjustments and concluded they were not material to any previously issued interim or annual consolidated financial statements. The accompanying footnotes have also been adjusted to reflect such correction.

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NCR Atleos Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The Company will effect the revision of its consolidated financial statements as of the year ended December 31, 2023 when it files its Form 10-K for the period ended December 31, 2024.

The following table reflects the impact of the revision to the specific line items presented in the Company’s previously reported Consolidated Balance Sheet as of December 31, 2023.


In millions	As Reported		Adjustments		As Revised
Current assets

Accounts receivable, net	$	714	$	(3)	$	711
Other current assets	271		(17)		254
Total current assets	1,895		(20)		1,875
Property, plant and equipment, net	470		(2)		468
Prepaid pension cost	218		1		219
Other assets	173		(4)		169
Total assets	$	5,741	$	(25)	$	5,716
Current liabilities
Payroll and benefits liabilities	151		(2)		149
Other current liabilities	477		9		486
Total current liabilities	1,747		7		1,754
Total liabilities	$	5,454	$	7	$	5,461
Atleos stockholders’ equity
Paid-in capital	16		(4)		12
Retained earnings	181		(28)		153
Total Atleos stockholders’ equity	284		(32)		252
Total stockholders’ equity	287		(32)		255
Total liabilities and stockholders’ equity	$	5,741	$	(25)	$	5,716

As it relates to the statement of changes in stockholders’ equity for the three months ended March 31, 2024, the revision adjustment removes the $8 million decrease to retained earnings recorded on the line “Net transfers to Voyix, including Separation adjustments.” The revision adjustment further reflects the impact of an incremental $4 million adjustment to Paid-in capital on the line “Stock compensation plans.” Such amounts are included as part of the $28 million and $4 million adjustments to retained earnings and paid-in capital, respectively, shown in the table above at December 31, 2023.

Cash, Cash Equivalents, and Restricted Cash The reconciliation of cash, cash equivalents and restricted cash in the Condensed Consolidated Statements of Cash Flows is as follows:


In millions	Location in the Condensed Consolidated Balance Sheet	June 30
		2024		2023
Cash and cash equivalents	Cash and cash equivalents	$	374	$	337
Short term restricted cash	Restricted cash	7		—

Long term restricted cash	Other Assets	7		2
Cash included in settlement processing assets	Restricted cash	242		226

Total cash, cash equivalents, and restricted cash		$	630	$	565

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NCR Atleos Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Contract Assets and Liabilities The following table presents the net contract liability balances as of June 30, 2024 and December 31, 2023. As of June 30, 2024 and December 31, 2023, no contracts were in a net asset position.


In millions	Location in the Condensed Consolidated Balance Sheet	June 30, 2024		December 31, 2023
Current portion of contract liabilities	Contract liabilities	$	318	$	325
Non-current portion of contract liabilities	Other liabilities	$	27	$	29

During the six months ended June 30, 2024, the Company recognized $216 million in revenue that was included in contract liabilities as of December 31, 2023. During the six months ended June 30, 2023, the Company recognized $177 million in revenue that was included in contract liabilities as of December 31, 2022.

Remaining Performance Obligations Remaining performance obligations represent the transaction price of contracts for which products have not been delivered or services have not been performed. As of June 30, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $2 billion. The Company expects to recognize revenue on approximately three-quarters of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter. The majority of our professional services are expected to be recognized over the next 12 months but this is contingent upon a number of factors, including customers’ needs and schedules.

The Company has made three elections that affect the value of remaining performance obligations described above. We do not disclose remaining performance obligations for contracts where variable consideration is directly allocated based on usage or when the original expected duration is one year or less. Additionally, we do not disclose remaining performance obligations for contracts where we recognize revenue from the satisfaction of the performance obligation in accordance with the “right to invoice” practical expedient.

Allowance for Credit Losses on Accounts Receivable The allowance for credit losses as of June 30, 2024 and December 31, 2023 was $18 million and $14 million, respectively. We continue to evaluate our reserves in light of the age and quality of our outstanding accounts receivable as well as risks to specific industries or countries and adjust the reserves accordingly. The impact to our allowance for credit losses for the three and six months ended June 30, 2024 and 2023 was immaterial. The Company recorded immaterial write-offs against the reserve for the three and six months ended June 30, 2024 and 2023. Additionally, the allowance for credit losses as of June 30, 2024 includes approximately $3 million related to other accounts receivable balances not transferred to Atleos as of December 31, 2023 due to delays in local processes of setting up certain Atleos legal entities. These entities were legally transferred to the Company during the first quarter of 2024. As such, the allowance for credit losses associated with these transferred entities were recorded in the Company’s Condensed Consolidated Balance Sheet as of March 31, 2024. Prior to the Separation, this amount was included within Atleos’ allowance for credit losses under carve-out methodology.

Recent Accounting Pronouncements

Adoption of New Accounting Pronouncements in fiscal year 2023

In October 2021, the Financial Accounting Standards Board (“FASB”) issued accounting standards update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, with new guidance for contract assets and contract liabilities acquired in a business combination. The new guidance requires contract assets and contract liabilities, such as deferred revenue, acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. Prior to the issuance of this guidance, contract assets and contract liabilities were recognized by the acquirer at fair value on the acquisition date. The accounting standards update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted and should be applied prospectively to acquisitions occurring on or after the effective date. The adoption of this accounting standards update did not have a material effect on the Company’s net income, cash flows or financial condition.

Although there are other new accounting pronouncements issued by the FASB and adopted by or effective for the Company, the Company does not believe any of these accounting pronouncements had a material impact on its Condensed Consolidated Financial Statements.

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Accounting Pronouncements Issued But Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through additional disclosures about significant segment expenses on an interim and annual basis. Additionally, it requires a public entity to disclose the title and position of the chief operating decision maker. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements unless impracticable. The Company is in the process of evaluating the disclosure requirements related to the new standard.

In December 2023, the FASB issued ASU 2023-08, Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets, which requires entities that hold crypto assets to subsequently measure such assets at fair value with changes recognized in net income each reporting period. The guidance also requires crypto assets measured at fair value to be presented separately from other intangible assets on the balance sheet and changes in the fair value measurement of crypto assets to be presented separately on the income statement from changes in the carrying amounts of other intangible assets. The new standard is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this ASU but does not expect it to have a material impact on its Condensed Consolidated Financial Statements and related disclosures as the Company generally does not carry a material amount of Bitcoin.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires more detailed income tax disclosures. The guidance requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction. The disclosure requirements will be applied on a prospective basis, with the option to apply them retrospectively. The new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is in the process of evaluating the impact of the new standard on the related disclosures.

Although there are new accounting pronouncements issued by the FASB and not yet adopted by or effective for the Company, the Company does not believe any of these accounting pronouncements will have a material impact on its Condensed Consolidated Financial Statements.

2. GOODWILL AND PURCHASED INTANGIBLE ASSETS

Goodwill by Segment The carrying amounts of goodwill by segment as of June 30, 2024 and December 31, 2023 are included in the table below. Foreign currency fluctuations are included within other adjustments.


	December 31, 2023						June 30, 2024
In millions	Goodwill		Additions		Other		Goodwill
Network	$	1,696	$	—	$	(1)	$	1,695
Self Service Banking(1)	256		—		—		256

Total goodwill	$	1,952	$	—	$	(1)	$	1,951

(1)The carrying amount of goodwill for the Self-Service Banking segment is presented net of accumulated impairment losses of $16 million as of each period end.

Based on the annual goodwill impairment test completed during 2023, the Company determined the fair value of all three reporting units was greater than their carrying value. However, as of the date of the previous annual assessment, the Network reporting unit had fair value in excess of carrying value of less than 10%. Accordingly, it was previously disclosed that this reporting unit has a heightened risk of impairment if any assumptions, estimates, or market factors changed in the future. We have considered potential impairment triggering events during the course of the first half of 2024, and did not identify any such matters warranting additional evaluation.

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Identifiable Intangible Assets The Company’s purchased intangible assets, reported in Intangibles, net in the Condensed Consolidated Balance Sheets, were specifically identified when acquired, and are deemed to have finite lives. The gross carrying amount and accumulated amortization for the Company’s identifiable intangible assets were as set forth in the table below.


	Amortization Period (in Years)	June 30, 2024				December 31, 2023
In millions		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization

Direct customer relationships	1 - 15	$	393	$	(95)	$	392	$	(84)
Technology-software	3 - 8	500		(214)		495		(185)
Tradenames	1 - 10	50		(38)		50		(33)
Total identifiable intangible assets		$	943	$	(347)	$	937	$	(302)

Amortization expense related to identifiable intangible assets for the following periods is:


	Three months ended June 30				Six months ended June 30
In millions	2024		2023		2024		2023
Amortization expense	$	23	$	25	$	48	$	50

The estimated aggregate amortization expense for identifiable intangible assets for the following periods is:


			For the years ended December 31
In millions	Remainder of 2024		2025		2026		2027		2028
Amortization expense	$	47	$	93	$	86	$	77	$	74

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NCR Atleos Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

3. SEGMENT INFORMATION AND CONCENTRATIONS

The Company manages and reports its operations in the following segments: Self-Service Banking, Network, and Telecommunications & Technology (“T&T”):

•Self-Service Banking—Offers solutions to enable customers in the financial services industry to reduce costs, generate new revenue streams and enhance customer loyalty. These solutions include a comprehensive line of ATM hardware and software, and related installation, maintenance, and managed and professional services. We also offer solutions to manage and run the ATM channel end-to-end for financial institutions that include back office, cash management, software management and ATM deployment, among others.

•Network—Provides a cost-effective way for financial institutions, fintechs, neobanks, and retailers to reach and serve their customers through our network of ATMs and multi-functioning financial services kiosks. We offer credit unions, banks, digital banks, fintechs, stored-value debit card issuers, and other consumer financial services providers access to our ATM network, including our proprietary Allpoint network, providing convenient and fee-free cash withdrawal and deposit access to their customers and cardholders as well as the ability to convert a digital value to cash, or vice versa, via ReadyCode (formerly Pay360). We also provide ATM branding solutions to financial institutions, ATM management and services to retailers and other businesses, and our LibertyX business gives consumers the ability to buy and sell Bitcoin.

•T&T—Offers managed network and infrastructure services to enterprise clients across all industries via direct relationships with communications service providers and technology manufacturers. Our customers rely on us as a strategic partner to help them reduce complexity, improve cost efficiency, and enable global geographical reach. We deliver expert professional, field, and remote services for modern network technologies including Software-Defined Wide Area Networking, Network Functions Virtualization, Wireless Local Area Networks, Optical Networking, and Edge Networks.

Corporate income and expenses not allocated to segments includes income and expenses related to corporate functions and certain allocations from NCR prior to Separation that are not specifically attributable to an individual reportable segment. Other income and expenses not allocated to segments includes certain other immaterial business operations, including commerce-related operations in countries that Voyix exited that are aligned to Atleos, that do not represent a reportable segment. For periods after the separation from Voyix, Other also includes revenues from commercial agreements with Voyix.

These segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by our chief operating decision maker (“CODM”) in assessing segment performance and in allocating the Company’s resources. Management evaluates the performance of the segments based on revenue and Adjusted EBITDA. Atleos determines Adjusted EBITDA based on GAAP net income (loss) attributable to Atleos plus interest expense, net; plus income tax expense (benefit); plus depreciation and amortization; plus acquisition-related costs; plus pension mark-to-market adjustments, pension settlements, pension curtailments and pension special termination benefits; plus separation-related costs; plus transformation and restructuring charges (which includes integration, severance and other exit and disposal costs); plus stock-based compensation expense; plus other special (expense) income items. These adjustments are considered non-operational or non-recurring in nature and are excluded from the Adjusted EBITDA metric utilized by our CODM in evaluating segment performance.

Assets are not allocated to segments, and thus are not included in the assessment of segment performance. Consequently, we do not disclose total assets by reportable segment.

The accounting policies used to determine the results of the operating segments are the same as those utilized for the Condensed Consolidated Financial Statements as a whole. Inter-segment sales and transfers are not material.

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The following table presents revenue and Adjusted EBITDA by segment:


In millions	Three months ended June 30				Six months ended June 30
	2024		2023		2024		2023
Revenue by segment
Self-Service Banking	$	673	$	654	$	1,301	$	1,260
Network	326		309		636		609
T&T	51		49		102		99
Total segment revenue	1,050		1,012		2,039		1,968
Other (1)	31		28		92		58

Consolidated revenue	$	1,081	$	1,040	$	2,131	$	2,026

Adjusted EBITDA by segment
Self-Service Banking	$	158	$	173	$	292	$	312
Network	101		91		187		166
T&T	8		6		18		16
Total Segment Adjusted EBITDA	$	267	$	270	$	497	$	494

Total Segment Adjusted EBITDA	$	267	$	270	$	497	$	494
Less unallocated amounts
Corporate income and expenses not allocated to segments	77		81		149		169
Other income and expenses not allocated to segments	(3)		(9)		(7)		(19)
Interest expense, net (2)	79		5		158		9

Interest income	(2)		—		(4)		—
Income tax expense	4		23		8		48
Depreciation and amortization expense	43		35		87		70
Acquisition-related amortization of intangibles	23		25		48		50
Stock-based compensation expense	9		19		19		33
Separation costs	6		33		15		40
Acquisition-related costs	(4)		—		(4)		—
Transformation and restructuring	6		5		7		5


Net income attributable to Atleos	$	29	$	53	$	21	$	89

(1)Other revenue represents certain other immaterial business operations, including commerce-related operations in countries that Voyix exited that are aligned to Atleos, that do not represent a reportable segment. For periods after the separation from Voyix, Other also includes revenues from commercial agreements with Voyix.

(2)Includes Related party interest expense, net, as presented in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023.

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The following table presents the recurring revenue and all other products and services revenue that is recognized at a point in time for Atleos:


In millions	Three months ended June 30				Six months ended June 30
	2024		2023		2024		2023
Recurring revenue (1)	$	793	$	730	$	1,556	$	1,440
All other products and services	288		310		575		586
Total revenue	$	1,081	$	1,040	$	2,131	$	2,026

(1)Recurring revenue includes all revenue streams from contracts where there is a predictable revenue pattern that will occur at regular intervals with a relatively high degree of certainty. This includes hardware and software maintenance revenue, processing revenue, interchange and network revenue, Bitcoin-related revenue, and certain professional services arrangements, as well as term-based software license arrangements that include customer termination rights.

Revenue is attributed to the geographic area to which the product is delivered or in which the service is provided. The following table presents revenue by geographic area for Atleos:


In millions	Three months ended June 30				Six months ended June 30
	2024		2023		2024		2023
United States (“U.S.”)	$	491	$	464	$	970	$	931
Americas (excluding U.S.)	128		133		266		252

Europe, Middle East and Africa	335		318		638		599
Asia Pacific	127		125		257		244
Total revenue	$	1,081	$	1,040	$	2,131	$	2,026

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

4. DEBT OBLIGATIONS

The following table summarizes the Company’s short-term borrowings and long-term debt:


In millions, except percentages	June 30, 2024				December 31, 2023
	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
Short-Term Borrowings
Current portion of Senior Secured Credit Facility (1)	$	81	9.00	%	$	73	8.93	%
Other (1)	3		7.22	%	3		7.23	%
Total short-term borrowings	$	84			$	76
Long-Term Borrowings
Senior Secured Credit Facility:
Term loan facility (1)	$	1,467	9.41	%	$	1,512	9.44	%
Revolving credit facility (1)	176		9.56	%	155		8.71	%
Senior Secured Notes:
9.500% Senior Secured Notes due 2029	1,350				1,350
Discount and deferred financing fees	(77)				(85)
Other (1)	5		7.17	%	6		7.18	%
Total long-term debt	$	2,921			$	2,938

(1)Interest rates are weighted average interest rates as of June 30, 2024 and December 31, 2023.

Senior Secured Credit Facility The Company is party to a Credit Agreement, which provides for a senior secured Term Loan A facility in an aggregate principal amount of $835 million (the “Term Loan A Facility”), a senior secured Term Loan B facility in an aggregate principal amount of $750 million (the “Term Loan B Facility” and together with the Term Loan A Facility, the “Term Loan Facilities”), and a revolving credit facility with commitments in an initial aggregate principal amount of $500 million (the “Revolving Credit Facility” and, together with the Term Loan Facilities, the “Credit Facilities”).

As of June 30, 2024, the Term Loan Facilities under the Credit Agreement have an aggregate principal amount of $1,585 million, of which $1,548 million remained outstanding. Additionally, as of June 30, 2024, there was $176 million outstanding under the Revolving Credit Facility. The Revolving Credit Facility also contains a sub-facility to be used for letters of credit and, as of June 30, 2024, outstanding letters of credit were $26 million. Our borrowing capacity under our Revolving Credit Facility was $298 million at June 30, 2024.

The outstanding principal balance of the Term Loan A Facility is required to be repaid in quarterly installments that began on March 31, 2024, in an amount equal to (i) 1.875% of the original aggregate principal amount during the first three years and (ii) 2.50% of the original aggregate principal amount during the final two years. Any remaining outstanding balance will be due at maturity on October 16, 2028.

The outstanding principal balance of the Term Loan B Facility is required to be repaid in quarterly installments that began on March 31, 2024, in an amount equal to (i) 0.35% of the original aggregate principal amount during the first year, (ii) 0.875% of the original aggregate principal amount during the second year, (iii) 1.75% of the original aggregate principal amount during the third and fourth years, and (iv) 2.625% of the original aggregate principal amount thereafter. Any remaining outstanding balance will be due at maturity on April 16, 2029.

The Revolving Credit Facility is not subject to amortization and will mature on October 16, 2028.

The obligations under the Credit Agreement, and the guarantees of those obligations, were secured by substantially all of the Company’s assets and the assets of the Company’s wholly-owned domestic subsidiaries (the “Subsidiary Guarantors”), in each case, subject to customary exceptions and exclusions (the “Collateral”).

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The Credit Agreement contains customary representations and warranties, affirmative covenants, and negative covenants. The negative covenants limit the Company and its subsidiaries’ ability to, among other things, incur indebtedness, create liens on the Company’s or its subsidiaries’ assets, engage in fundamental changes, make investments, sell or otherwise dispose of assets, engage in sale-leaseback transactions, make restricted payments, repay subordinated indebtedness, engage in certain transactions with affiliates and enter into agreements restricting the ability of the Company’s subsidiaries to make distributions to the Company or incur liens on their assets.

The Credit Agreement contains a financial covenant, that does not permit the Company to allow its consolidated leverage ratio of Consolidated Total Debt to Consolidated EBITDA (each as defined in the Credit Agreement) to exceed (i) in the case of any fiscal quarter ending prior to September 30, 2024, 4.75 to 1.00, (ii) in the case of any fiscal quarter ending on or following September 30, 2024 and prior to September 30, 2025, 4.50 to 1.00 and (iii) in the case of any fiscal quarter ending on or following September 30, 2025, 4.25 to 1.00, in each case subject, to (x) increases of 0.25 in connection with the consummation of any material acquisition and applicable to the fiscal quarter in which such acquisition is consummated and the three consecutive fiscal quarters thereafter, and (y) a maximum cap of 5.00 to 1.00.

Senior Secured Notes The 9.500% senior secured notes due in 2029 (the “Notes”) are unconditionally guaranteed on a senior secured basis, subject to certain limitations, by the Subsidiary Guarantors that will guarantee the Credit Facilities. The Notes and related guarantees will be secured, subject to permitted liens and certain other exceptions, by first-priority liens on the Collateral (as defined above). Interest is payable on the Notes semi-annually, in arrears, at an annual rate of 9.500% on April 1 and October 1 of each year, beginning on April 1, 2024. The Notes will mature on April 1, 2029.

The Indenture contains customary events of default, including, among other things, payment default, exchange default, failure to provide certain notices thereunder and certain provisions related to bankruptcy events. The Indenture also contains customary high yield affirmative and negative covenants, including negative covenants that, among other things, limit the Company and its restricted subsidiaries’ ability to incur additional indebtedness, create liens on, sell or otherwise dispose of assets, engage in certain fundamental corporate changes or changes to lines of business activities, make certain investments or material acquisitions, engage in sale-leaseback or hedging transactions, repurchase common stock, pay dividends or make similar distributions on capital stock, repay certain indebtedness, engage in certain affiliate transactions and enter into agreements that restrict their ability to create liens, pay dividends or make loan repayments.

Other Debt In December 2022, NCR and Cardtronics USA, Inc., a wholly owned subsidiary of the Company, entered into a master loan agreement (the “ATMaaS Facility”) with Banc of America Leasing & Capital, LLC (“BALCAP”) pursuant to which either NCR or Cardtronics USA, Inc., as applicable, may specify one or more ATM as a Service contracts, including any rights to receive payment thereunder, and the ATM equipment thereto (“ATMaaS Assets”) as security interest in the borrowing. The total amount available under the ATMaaS Facility is $20 million with repayment terms up to four years. As of June 30, 2024, total debt outstanding under the financing program was $8 million with a weighted average interest rate of 7.19% and a weighted average term of 2.4 years. As of December 31, 2023, total debt outstanding was $9 million with a weighted average interest rate of 7.20% and a weighted average term of 2.8 years.

Fair Value of Debt The Company utilized Level 2 inputs, as defined in the fair value hierarchy, to measure the fair value of the long-term debt, which, as of June 30, 2024 and December 31, 2023 was $3,208 million and $3,172 million, respectively. Management’s fair value estimates were based on quoted prices for recent trades of Atleos’ long-term debt, quoted prices for similar instruments, and inquiries with certain investment communities.

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

5. TRADE RECEIVABLES FACILITY

The Company maintains a trade receivables facility (the “Trade Receivables Facility”) with PNC Bank, National Association (“PNC”) as administrative agent, and PNC, MUFG Bank, Ltd., Victory Receivables Corporation and the other purchasers from time to time party thereto (the “Purchasers”), which allows the Company’s wholly-owned, bankruptcy remote subsidiaries, NCR Atleos Receivables LLC (the “U.S. SPE”) and NCR Atleos Canada Receivables LP (the “Canadian SPE”), to sell certain trade receivables on a revolving basis to the Purchasers participating in the Trade Receivable Facility. The Trade Receivable Facility became effective October 16, 2023 and has an initial term of two years, unless earlier terminated in accordance with the terms thereof, and may be extended by agreement of the parties.

Under the Trade Receivables Facility, the Company and certain United States and Canadian operating subsidiaries of the Company continuously sell their trade receivables as they are originated to the U.S. SPE and a Canadian SPE (collectively, the “SPEs”), as applicable. No assets or credit of either SPE is available to satisfy the debts and obligations owed to the creditors of the Company or any other person until the obligations of the SPEs under the Trade Receivables Facility have been satisfied. The Company controls, and therefore consolidates, the SPEs in its Condensed Consolidated Financial statements.

As cash is collected on the trade receivables, the U.S. SPE has the ability to continuously transfer ownership and control of new qualifying receivables to the Purchasers such that the total outstanding balance of trade receivables sold can be up to $166 million at any point in time (i.e., the maximum purchase commitment). The future outstanding balance of trade receivables that are sold is expected to vary based on the level of activity and other factors and could be less than the maximum purchase commitment. The total outstanding balance of trade receivables that have been sold and derecognized by the U.S. SPE was approximately $166 million and $166 million as of June 30, 2024 and December 31, 2023, respectively. Excluding the trade receivables sold, the SPEs collectively owned $81 million and $90 million of trade receivables as of June 30, 2024 and December 31, 2023, respectively, and these amounts are included in Accounts receivable, net in the Company’s Condensed Consolidated Balance Sheets.

Continuous cash activity related to the Trade Receivables Facility is reflected in Net cash provided by operating activities in the Condensed Consolidated Statements of Cash Flows. The U.S. SPE incurs fees due and payable to the Purchasers. Those fees, which are immaterial, are recorded within Other (expense) income, net in the Condensed Consolidated Statements of Operations. In addition, each of the SPEs has provided a full recourse guarantee in favor of the Purchasers of the full and timely payment of all trade receivables sold to them by the U.S. SPE. The guarantee is collateralized by all the trade receivables owned by each of the SPEs that have not been sold. The reserve recognized for this recourse obligation as of June 30, 2024 and December 31, 2023 is not material.

Cardtronics USA Inc. and Cardtronics Canada Holdings Inc. continue to be involved with the trade receivables even after they are transferred to the SPEs (or further transferred to the Purchasers) by acting as a servicer. In addition to any obligations as servicer, the U.S. Originators and Canadian Originator provide the SPEs with customary recourse in respect of (i) certain dilutive events with respect to the trade receivables sold to the SPEs that are caused by the originator and (ii) in the event of certain violations by the originator of their representations and warranties with respect to the trade receivables sold to the SPEs. These servicing and originator liabilities of the Company and its subsidiaries (other than the SPEs) under the Trade Receivables Facility are not expected to be material, given the high quality of the customers underlying the receivables and the anticipated short collection period.

The Trade Receivables Facility includes other customary representations and warranties, affirmative and negative covenants and default and termination provisions, which provide for the acceleration of amounts owed to the Purchasers thereunder in circumstances including, but not limited to, failure to pay capital or yield when due, breach of representation, warranty or covenant, certain insolvency events or failure to maintain the security interest in the trade receivables, and defaults under other material indebtedness.

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

6. INCOME TAXES

Income tax provisions for interim (quarterly) periods are based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items.

Income tax expense was $4 million for the three months ended June 30, 2024 compared to income tax expense of $23 million for the three months ended June 30, 2023. The change was primarily driven by lower income before taxes and discrete tax benefits realized in the three months ended June 30, 2024, compared to the prior year period. In the three months ended June 30, 2024, the Company recognized a $9 million benefit related to provision to return adjustments. In the three months ended June 30, 2023, the Company recognized a $2 million expense from recording a valuation allowance against deferred tax assets in Turkey.

Income tax expense was $8 million for the six months ended June 30, 2024 compared to income tax expense of $48 million for the six months ended June 30, 2023. The change was primarily driven by lower income before taxes and discrete tax benefits realized in the six months ended June 30, 2024, compared to the prior year. In the six months ended June 30, 2024, the Company recognized an $11 million benefit related to provision to return adjustments. In the six months ended June 30, 2023, the Company recognized a $2 million expense from recording a valuation allowance against deferred tax assets in Turkey.

As of June 30, 2024, the Company estimates that it is reasonably possible that gross unrecognized tax benefits may decrease by $6 million to $8 million in the next 12 months.

7. STOCK COMPENSATION PLANS

Stock-based compensation expense is recognized within Operating expenses in the Condensed Consolidated Financial Statements, depending on the nature of the employee’s role in our operations, based upon fair value. Consistent with the requirements of ASC 718, Compensation-Stock Compensation, our stock-based compensation expense includes expense on all awards held by Atleos employees, including converted option and restricted stock unit awards in Voyix common stock.

Stock-based compensation expense for the following periods were:


In millions	Three months ended June 30				Six months ended June 30
	2024		2023		2024		2023
Restricted stock units	$	9	$	6	$	19	$	11


Tax expense (benefit)	(1)		(1)		(2)		(2)
Stock-based compensation expense (net of tax)	$	8	$	5	$	17	$	9

Total stock-based compensation expense, presented in the table above for the three and six months ended June 30, 2023, is specifically for employees who exclusively supported Atleos’ operations. Total stock-based compensation expense allocated to Atleos for corporate and shared employees was $13 million and $22 million for the three and six months ended June 30, 2023, respectively.

On February 16, 2024, the Company granted restricted stock units under the 2023 Stock Incentive Plan to its executive officers and other employees, comprised of both time-based and market-based restricted stock units. The time-based restricted stock units were granted with a weighted-average grant date fair value of $21.90 and vest in annual installments over a three-year requisite service period ending February 16, 2027.

The market-based restricted stock units vest in an amount between zero and 200% of the target units granted based on the Company’s relative total shareholder return from January 1, 2024 to December 31, 2026 (the “performance period”), as compared to a designated peer group. The fair value of the awards was determined to be $27.46 per share based on using a Monte-Carlo simulation model and will be recognized over a three-year requisite service period ending February 16, 2027.

Both time-based and market-based restricted stock units granted to executive officers are subject to a mandatory one-year post-vesting holding period. As such, a discount for lack of marketability was calculated using the Finnerty model and

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

applied to the awards subject to the post-vesting restrictions. The fair value of the time-based and market-based awards subject to the post-vesting restrictions were $19.36 and $24.27, respectively.

The table below details the significant assumptions used in determining the fair value of the market-based restricted stock units granted on February 16, 2024:


Dividend yield	3.46	%
Risk-free interest rate	4.35	%
Expected volatility	55.15	%
Discount for lack of marketability	11.59	%

Expected volatility for these restricted stock units is calculated as the historical volatility of the Company’s peers over a period of approximately three years, as management believes this is the best representation of prospective trends given the limited trading history of Atleos’ stock. The risk-free interest rate was determined based on a three-year U.S. Treasury yield curve in effect at the time of the grant. The dividend yield was based on the Company’s estimated annual dividend payment and stock price. The discount for lack of marketability was based on a Finnerty put-option model, which uses the price of a put to estimate the cost of insuring the value of the award against downside risk during the holding period.

As of June 30, 2024, the total unrecognized compensation cost related to unvested restricted stock grants is $54 million. The unrecognized compensation cost is expected to be recognized over a weighted average period of approximately 2.2 years.

Employee Stock Purchase Plan In October 2023, the Board of Directors adopted the NCR Atleos Employee Stock Purchase Plan, effective October 18, 2023. The total number of shares of the Company’s common stock reserved for future issuance at inception was 5 million. The Company’s Employee Stock Purchase Plan (“ESPP”) provides employees up to a 15% discount on stock purchases using a three-month look-back feature where the discount is applied to the stock price that represents the lower of Atleos’ closing stock price on either the first day or the last day of each calendar quarter. Participants can contribute between 1% and 10% of their compensation. The first offering under the ESPP will be the three-month period from July 1, 2024 to September 30, 2024.

8. EMPLOYEE BENEFIT PLANS

Components of net periodic benefit cost (income) of the pension plans, including amounts allocated prior to the Spin-off, for the three months ended June 30 were as follows:


	U.S. Pension Benefits				International Pension Benefits				Total Pension Benefits
In millions	2024		2023		2024		2023		2024		2023
Net service cost	$	—	$	—	$	1	$	—	$	1	$	—
Interest cost	16		—		5		5		21		5
Expected return on plan assets	(19)		—		(8)		(7)		(27)		(7)


Net periodic benefit cost (income)	$	(3)	$	—	$	(2)	$	(2)	$	(5)	$	(2)

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NCR Atleos Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Components of net periodic benefit cost (income) of the pension plans, including amounts allocated prior to the Spin-off, for the six months ended June 30 were as follows:


	U.S. Pension Benefits				International Pension Benefits				Total Pension Benefits
In millions	2024		2023		2024		2023		2024		2023
Net service cost	$	—	$	—	$	1	$	—	$	1	$	—
Interest cost	33		—		10		10		43		10
Expected return on plan assets	(38)		—		(17)		(15)		(55)		(15)


Net periodic benefit cost (income)	$	(5)	$	—	$	(6)	$	(5)	$	(11)	$	(5)

All components of net periodic benefit cost (income) of the postretirement plan, including amounts allocated prior to the Spin-off, for the three and six months ended June 30, 2024 and 2023 were immaterial.

Components of net periodic benefit cost (income) of the postemployment plans, including amounts allocated prior to the Spin-off, for the three and six months ended June 30 were as follows:


	Three months ended June 30				Six months ended June 30
In millions	2024		2023		2024		2023
Net service cost	$	1	$	1	$	3	$	3
Interest cost	2		—		2		—



Net periodic benefit cost (income)	$	3	$	1	$	5	$	3

The components of net periodic benefit cost (income), other than the net service cost component, are recorded in Other income (expense), net in the Condensed Consolidated Statements of Operations.

Employer Contribution

Pension For the three months ended June 30, 2024, Atleos made no contributions to its international pension plans. For the six months ended June 30, 2024, Atleos contributed $1 million to its international pension plans. Atleos anticipates contributing an additional $2 million to its international pension plans for a total of $3 million in 2024.